When Should You File for Bankruptcy?

While no one wants to declare bankruptcy, there are cases in which it can be the best choice for a family’s long-term financial well-being. Despite the stigma that is attached to bankruptcy, it can help a person or family get a fresh financial start, allowing them to escape a difficult financial situation that may have occurred through no fault of their own, but simply because of bad luck.

If money issues have created an inescapable burden, Chapter 7 bankruptcy or Chapter 13 bankruptcy can provide relief for those who qualify. A bankruptcy attorney can tell you if either of those options might work for you, or if you should go another route.

Should I File for Bankruptcy?

Divorce, loss of employment, sizable medical bills, potential home foreclosure, and unmanageable credit card debt are common reasons why people declare bankruptcy. However, before you consider taking this step, you will likely want to exhaust all other possible avenues.

If you are employed full-time, but a second job can help pay the bills, you may wish to seek out additional part-time employment opportunities. If you own valuable assets that you can live without, selling them may allow you to pay down some of your debts.

You may be able to take advantage of credit counseling services that can examine your money problems and perhaps prescribe a debt management plan, debt consolidation, or debt settlement. Many creditors are willing to negotiate debt collection terms if you demonstrate a clear willingness to pay. An attorney can help in such discussions with mortgage lenders or with auto loans and credit cards.

If, after reviewing your options and the resources available, you find that you will have difficulty paying off your debts while meeting your ongoing needs, bankruptcy might be the best choice for you.

Types of Bankruptcy

The most common type of bankruptcy, Chapter 7, accounted for 63 percent of all bankruptcies filed in 2016, and 95.5 percent of successful petitioners were freed from their debts. You must pass a “means test” to confirm eligibility, which includes a full assessment of your income, expenses, and debt. After all non-exempt property is liquidated, debt discharge can occur.

Chapter 13 bankruptcy is for those who have a steady income but cannot meet immediate creditor demands. It allows three to five years for full debt resolution, with all discretionary income going toward debt reduction. This type of bankruptcy is especially useful in fighting off house foreclosure.

The Impact of Bankruptcy

There are several reasons why bankruptcy is often considered the path of last resort. Your filing could appear in local notices in the newspaper or on TV or radio. Your credit score could drop anywhere from 75 to 200 points. Chapter 7 bankruptcy will stay on your credit report for 10 years, while Chapter 13 bankruptcy remains there for seven years.

Contact an Orland Park Bankruptcy Attorney

Filing for bankruptcy is one of the most serious decisions you can make, so it is imperative to get advice that you can trust. To discuss your options with an experienced Tinley Park bankruptcy lawyer, call 708-226-9904 and schedule a free consultation.

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